If you decide to incorporate your business, there are two alternatives. If your business activity will be confined mainly to Prince Edward Island, then it is necessary to incorporate only as a provincial company under the Companies Act of P.E.I. A corporation can be set up under the Canada Business Corporations Act and many companies are incorporated federally if they are going to operate in several provinces of Canada. However, it should be noted that even a federally incorporated company is required to register as an extra provincial corporation in several provinces if the company conducts business there.

The distinguishing features of the corporation or limited company as it is often referred to are as follows:

The major advantage of incorporation is limited liability. The limited company constitutes a legal entity and is distinct and separate from its shareholders, officers, and directors. This means that no shareholder of a company is personally liable for the debts, obligations, or acts of the company.

There is a potentially greater source of capital available because it is possible for people to invest without having to accept any responsibility for the actual running of the company.

Ownership is readily transferable -- shares may be transferred without affecting the management of the business.

Because the company is a separate entity it does not cease to exist with the death of a shareholder.

There is greater flexibility concerning taxation.

If you decide to incorporate your business, there are two alternatives. If your business activity will be confined mainly to Prince Edward Island, then it is necessary to incorporate only as a provincial company under the Companies Act of P.E.I. Should your business plans include expansion of your company markets to other provinces you may be required to register in each additional province as an extra-provincial company. A corporation can be set up under the Canada Business Corporations Act and many companies are incorporated federally if they are going to operate in several provinces of Canada. However, it should be noted that even a federally incorporated company is required to register as an extra provincial corporation in several provinces if the company conducts business there.

The cost of setting up a corporation is greater than that involved in forming a sole proprietorship or partnership. The incorporation fee payable to the Provincial Treasurer is $265.00.

There are also lawyers' fees involved in the incorporation of a company under the Companies Act, as well as sundry costs such as the purchase of a corporate seal, minute book, etc.

A corporation is usually more complex than a proprietorship or partnership and involves more paperwork and higher legal and accounting fees.

Companies incorporated under the Companies Act of Prince Edward Island are required to file an Annual Return with the Consumer, Corporate & Insurance Services Division of the Department of Justice and Public Safety. The annual return includes information on the name of the corporation, the date of its incorporation, its fiscal year end, and a description of the business carried on in P.E.I. and outside the Province. The annual return also requires disclosure of the authorized and issued share capital of the company and a list of the names and addresses of the officers, directors, and shareholders of the company. The annual return filing fee is $30.00. Please note that these forms must be filed in duplicate.

This information has been taken from the website: Justice and Public Safety URL: http://www.gov.pe.ca/jps/index.php3?number=44662&lang=E

PLEASE NOTE: The inclusion of or reference to any business or organization on this page is not meant to be an endorsement by the Government of Prince Edward Island of the services offered by any particular business or organization. Further, the Government of Prince Edward Island advises that individual entries are based on information supplied by the business or organization in question. Therefore, while InfoPEI is updated to correct errors as appropriate, the Government of Prince Edward Island does not warrant that the information is accurate.